Tucked away inside the bipartisan budget deal announced with much fanfare this week is a proposal limiting the maximum level contractors can charge the government to pay the salaries of their top executives to nearly half of what it is currently. But it may not be the final word on the issue on the sticky issue of contractor compensation. the budget deal’s proposed changes to taxpayer-funded contractor salaries are competing with another piece of bipartisan legislation currently before Congress. The annual Defense Authorization Act seeks to lower the compensation limit but by far less than the budget deal.
The Office of Federal Procurement Policy issued a memo to agencies setting the new benchmark for reimbursable costs at $952,308, up from $763,029 in 2011 for certain contractor employee salaries. The contractor cap has increased 55 percent over the last four years. OFPP blames Congress for not acting to change the formula for calculating the annual increases.
With the announcement from Defense Secretary Chuck Hagel recalling most Defense Department civilians from furloughs, some large defense companies, which had been planning to furlough their employees, have canceled or scaled back their initial plans. However, DoD’s move could wind up having only a limited impact on contractors more broadly.
The General Services Administration plans to award the $60 billion multiple award contract for complex professional services by October. Concerns again arise over whether there are too many multiple award contracts.
In a letter to Tom Sharpe, the commissioner of the General Services Administration’s Federal Acquisition Service, three industry groups — the Coalition for Government Procurement, the Professional Services Council and TechAmerica — wrote that restricting communication between managers and contractors could have a “chilling effect” on managers’ role in the Multiple Award Schedules (MAS) program.
Reducing the contractor compensation cap to the level of the salary drawn by the President ($400,000) or the Vice President ($230,700), as suggested by some lawmakers and the White House in the past, would dramatically increase the number of employees who earn compensation above the allowable limits GAO said. But the changes would mostly affect large companies, auditors said, because few of the small companies it surveyed pay their employees more than the amount earned by the President and Vice President.
Rep. Darrell Issa plans to formally introduce the Federal IT Acquisition Reform Act before the end of March. The House Oversight and Government Reform Committee held its second hearing on the draft bill. Current and former federal officials say the bill should place a stronger emphasis on project management and workforce issues.
In an analysis prepared for the American Federation of Government Employees, contracting expert Charles Tiefer said that agency managers have a number of tools at their disposal to legally scale back service-contract spending and that doing so would be preferable to federal furloughs.
Guidance from the administration on what steps federal agencies should take to prepare for potential across-the-board budget cuts has set off a war of words between federal-employee unions and industry groups. The American Federation of Government Employees says guidance exempts contractors at the expense of federal employees, but industry groups say the criticism is misguided.
Stan Soloway, the President and CEO of the PSC, and Phil Kangas, a principal with Grant Thornton, joined Pentagon Solutions with Francis Rose to discuss the findings of a survey of federal acquisition personnel.